Billionaire John Catsimatidis is pouring cash into energy holdings, including a Brooklyn biofuel plant.

John Catsimatidis, the larger-than-life supermarket mogul and political gadfly, is in the midst of a transformation. The billionaire is well on his way to becoming not only a New York heating-oil kingpin but, in an odd twist of fate, a darling of the green movement.

Last month, his United Metro Energy Corp. purchased Direct Energy Business' heating-oil holdings in New York City, giving Mr. Catsimatidis ownership of 700 commercial and residential contracts to supply 8,000 locations—a package said to be worth more than $500 million.

The seller was Hess Corp., the $40 billion oil and natural-gas giant headquartered in New York that is getting out of the retail end of the business. Mr. Catsimatidis wouldn't disclose the price he paid, citing a confidentiality agreement with the sellers. A spokeswoman for Direct Energy confirmed the sale but declined to disclose the price.

That deal, coupled with his acquisition of a ConocoPhillips petroleum terminal in Riverhead, L.I., in 2012, and his purchase at a bankruptcy auction of a nearly complete Brooklyn biofuel processing plant in 2013 that will be the largest in the Northeast, makes United Metro one of the largest players in New York's heating-oil industry. The deal also makes the company's owner, estimated to be worth $3 billion, the biggest individual fish in that market.

It's a big role, one that seems to suit Mr. Catsimatidis mightily, though with at least one caveat.

"I'm not leaving," he said, slapping his hand on the table in an interview at his modest pinewood-paneled 11th Avenue office. "We're investing more … in energy and real estate. Just, unfortunately, not in supermarkets."

It was those supermarkets that earned him his vast wealth, but also proved to be somewhat of an albatross during his quixotic run for mayor last year. Today, his chain of Gristedes supermarkets has been reduced to 32 down-at-the-heels stores, from a height of 100 markets once viewed as high-end. In his political campaign, he ended up spending what amounted to a whopping $419 for each vote he received, more than double what Michael Bloomberg spent in 2009.

But while Mr. Catsimatidis has toyed with elective office, he has also quietly been bulking up his fuel business by purchasing companies out of bankruptcy and gobbling up processing and refining facilities. But it is his acquisition of the Brooklyn biodiesel facility that has earned him a whole new identity: environmental champion.

Tapping restaurants

Green groups like the New York League of Conservation Voters laud the transaction as one that will result in the greater use of biofuel, which is refined from grease and used cooking oil from restaurants and delis across the city and has been shown to produce significantly less greenhouse gas than many traditional fuels. Shelby Neal, director of governmental relations for the National Biodiesel Board, said that environmentally the deal is a grand slam.

"New York City has a lot of feedstock, like used cooking oil from 10,000 restaurants," Mr. Neal said. "If you're going to have all that feedstock, it makes sense to take it across the street and turn it into biodiesel."

That said, Mr. Catsimatidis admits to being somewhat ambivalent about his newfound environmental correctness.

"I'm not a 100% green person," he said. "But I'm not against it."

Meanwhile, Mr. Catsimatidis' purchase of the Hess assets is also drawing praise.

"We like to see Hess' gallons sold by a local New York City distributor, especially since his company is pretty much a hands-on operator," said John Maniscalco, president of the New York Heating Oil Association.

$6M personal check

The deal is the latest in Mr. Catsimatidis' quest to expand his energy footprint, which began 30 years ago with his purchase of oil company United Refining out of bankruptcy—he wrote a personal check for $6 million.

That evolution quickened in 2012, when he bought the ConocoPhillips terminal. A year later, he purchased Metro Fuel Oil Corp. out of bankruptcy, a deal that included a large terminal complex in Greenpoint, Brooklyn, and a smaller one in Calverton, L.I. Following that transaction, he grandly rebranded Metro as United Metro Energy Corp.

Mr. Catsimatidis' biodiesel processing facility, now scheduled for completion early next year, is adjacent to the Brooklyn terminal. He predicts it will turn out as much as 50 million gallons of biodiesel a year.

Since 2012, oil and fuel insiders had been curious about Mr. Catsimatidis' intentions. The purchase of the business from Hess ends the mystery. The deal gives his oil and biofuel company a sales outlet, and direct access to hundreds of large apartment buildings, industrial complexes and big commercial buildings in the city and New Jersey. Better yet, it comes at a time when the city is trying to increase the amount of biofuel used in heating oil.

In other words, it's a good time to be in the biofuel business.

"People always refer to me as the supermarket so-and-so," Mr. Catsimatidis said. "But our two main businesses right now are energy and real estate."

He cites "sentimental reasons" for his decision to keep his last 30 Gristedes locations alive.